SNAP INC. (Exact name of Registrant as Specified in Its Charter)

Transcription

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): February 6, 2018 SNAP INC. (Exact name of Registrant as Specified in Its Charter) Delaware (State or Other Jurisdiction (IRS Employer of Incorporation) (Commission File Number) Identification No.) 63 Market Street Venice, California (Address of Principal Executive Offices) (Zip Code) (310) (Registrant s Telephone Number, Including Area Code) Not Applicable (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below): Written communications pursuant to Rule 425 under the Securities Act (17 CFR ) Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR a-12) Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR d-2(b)) Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR e-4(c)) Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 ( of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 ( b-2 of this chapter). Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

2 Item 2.02 Results of Operations and Financial Condition. On February 6, 2018, Snap Inc. reported financial results for the three months and full year ended A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated by reference. The press release is furnished and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended. The information shall not be deemed incorporated by reference into any other filing with the Securities and Exchange Commission made by Snap Inc., whether made before or after today s date, regardless of any general incorporation language in such filing. Item 9.01 Financial Statements and Exhibits. (d) Exhibits. Exhibit Number Description 99.1 Press release dated February 6, 2018.

3 Exhibit Number Description 99.1 Press release dated February 6, Exhibit Index

4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SNAP INC. Date: February 6, 2018 By: /s/ Andrew Vollero Andrew Vollero Chief Financial Officer

5 Snap Inc. Reports Fourth Quarter and Full Year 2017 Results VENICE, Calif. February 6, 2018 Snap Inc. (NYSE: SNAP) today announced financial results for the quarter and full year ended Fourth Quarter and Full Year 2017 Financial Highlights: Exhibit 99.1 Percent Percent Change Change (dollars in thousands) (dollars in thousands) (Unaudited) (NM = Not Meaningful) (NM = Not Meaningful) Revenue $ 285,693 $ 165,682 72% $ 824,949 $ 404, % Net loss (1) $ (349,977) $ (169,945) 106% $ (3,445,066) $ (514,643) NM Adjusted EBITDA (2) $ (158,922) $ (152,284) 4% $ (720,056) $ (459,243) 57% Other Financial Highlights Cash, cash equivalents, and marketable securities $ 2,043,039 $ 987,368 Cash used in operating activities $ (176,083) $ (167,728) $ (734,667) $ (611,245) Free Cash Flow (3) $ (197,295) $ (188,104) $ (819,185) $ (677,686) Capital expenditures $ (21,212) $ (20,376) $ (84,518) $ (66,441) (1) Net loss for the year ended 2017 includes $2.6 billion of stock-based compensation expense, primarily due to the recognition of expense related to RSUs with a performance condition satisfied on the effectiveness of the registration statement for our initial public offering in March (2) Adjusted EBITDA is defined as net income (loss), excluding interest income; interest expense; other income (expense) net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time, as described below. (3) Free Cash Flow is defined as net cash used in operating activities, reduced by purchases of property and equipment. Note: For adjustments and additional information regarding the non-gaap financial measures discussed, please see Non-GAAP Financial Measures and Reconciliation of GAAP to Non- GAAP Financial Measures below. Operational Highlights Daily Active Users (DAU) (1) increased 8.9 million or 5% sequentially to 187 million, representing the highest net adds since Q DAUs increased 28.8 million or 18% year-over-year. Revenue was $285.7 million in Q4 2017, up 72% year-over-year and 37% sequentially, driven by auction traction and seasonality. Full year revenue was $824.9 million, up 104% year-over-year. Average revenue per user (ARPU) (2) was $1.53 in Q4 2017, up 46% year-over-year and 31% sequentially. Cost of revenue per user (CoRPU) (3) was $1.02 in Q4 2017, up 5% year-over-year and down 14% sequentially. Adjusted EBITDA loss was $(158.9) million in Q4 2017, an increase of 4% year-over-year and an improvement of 11% sequentially. Full year Adjusted EBITDA was $(720.1) million and was $(459.2) million in Cash and marketable securities were $2.0 billion at Cash management reduced Q cash burn to $255 million, down 49% sequentially. Capital expenditures remained modest in Q4 2017, given our capital light business model, at $21.2 million compared to $20.4 million in Q and $25.9 million in Q Full year capital expenditures were $84.5 million, less than $0.50 per DAU. (1) We define a Daily Active User, or DAU, as a registered Snapchat user who opens the Snapchat application at least once during a defined 24-hour period. We measure average Daily Active Users for a particular quarter by calculating the average Daily Active Users for that quarter. (2) We define average revenue per user, or ARPU, as quarterly revenue divided by the average Daily Active Users. (3) We define cost of revenue per user, or CoRPU, as quarterly cost of revenue divided by the average Daily Active Users.

6 CONFERENCE CALL INFORMATION Snap Inc. will host a conference call to discuss the results at 2:00 p.m. Pacific / 5:00 p.m. Eastern today. The live audio webcast along with supplemental information will be accessible at investor.snap.com. A recording of the webcast will also be available following the conference call. Snap Inc. uses the investor.snap.com and snap.com/news websites as means of disclosing material non-public information and for complying with its disclosure obligation under Regulation FD. Contact Investors and Analysts: ir@snap.com Press: press@snap.com 2

7 Forward-Looking Statements This press release contains forward-looking statements that are based on our management s beliefs and assumptions and on information currently available to management. Forward-looking statements include statements about expected financial metrics, such as revenue, non-gaap Adjusted EBITDA, capital expenditures, and stock-based compensation, as well as non-financial metrics, such as DAU and video views. They also include statements about our possible or assumed business strategies, potential growth opportunities, new products, and potential market opportunities. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as believe, could, potential, will, would or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, risks and uncertainties related to: our limited operating history, our lack of significant revenue and profitability to date, our ability to monetize our products, the highly competitive and rapidly changing market for internet and advertising companies, infrastructure costs, our ability to create new and innovative products, our ability to maintain users and manage any future user growth, litigation, and our international expansion strategies. Additional risks and uncertainties that could affect our financial results are included in the section titled Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations in the final prospectus for our initial public offering, dated March 1, 2017, and our quarterly reports on Form 10-Q, which are available on the SEC s website at Additional information will be made available in Snap Inc. s annual report on Form 10-K and other filings that we make from time to time with the SEC. In addition, any forward-looking statements contained in this press release are based on assumptions that we believe to be reasonable as of this date. Except as required by law, we assume no obligation to update these forwardlooking statements, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements. Non-GAAP Financial Measures To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-gaap financial measures, as described below, to understand and evaluate our core operating performance. These non-gaap financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use the non-gaap financial measure of Adjusted EBITDA, which is defined as net income (loss); excluding interest income; interest expense; other income (expense), net; income tax benefit (expense); depreciation and amortization; stock-based compensation expense and related payroll tax expense; and certain other non-cash or non-recurring items impacting net income (loss) from time to time, as described below. We believe that Adjusted EBITDA helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in Adjusted EBITDA. We use the non-gaap financial measure of Free Cash Flow, which is defined as net cash used in operating activities, reduced by purchases of property and equipment. We believe Free Cash Flow is an important liquidity measure of the cash that is available, after capital expenditures, for operational expenses and investment in our business and is a key financial indicator used by management. Additionally, we believe that Free Cash Flow is an important measure since we use third-party infrastructure partners to host our services and therefore we do not incur significant capital expenditures to support revenue generating activities. Free Cash Flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash. Once our business needs and obligations are met, cash can be used to maintain a strong balance sheet and invest in future growth. We use the non-gaap financial measure of Non-GAAP Net Loss, which is defined as net income (loss); excluding amortization of intangible assets; stock-based compensation expense and related payroll tax expense; certain other non-cash or non-recurring items impacting net income (loss) from time to time; and related income tax adjustments. Non-GAAP Net Loss and weighted average diluted shares are then used to calculate Non-GAAP diluted net loss per 3

8 share. Similar to Adjusted EBITDA, we believe these measures help identify underlying trends in our bus iness that could otherwise be masked by the effect of the expenses we exclude in the measure. We believe that these non-gaap financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects, and allow for greater transparency with respect to key metrics used by our management for financial and operational decisionmaking. We are presenting these non-gaap measures to assist investors in seeing our financial performance through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. For a reconciliation of these non-gaap financial measures to the most directly comparable GAAP financial measure, please see Reconciliation of GAAP to Non- GAAP Financial Measures below. Snap Inc., Snapchat, and our other registered and common law trade names, trademarks, and service marks are the property of Snap Inc. or our subsidiaries. 4

9 SNAP INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts, unaudited) Revenue $ 285,693 $ 165,682 $ 824,949 $ 404,482 Costs and expenses: Cost of revenue 191, , , ,660 Research and development 233,838 64,964 1,534, ,676 Sales and marketing 110,458 50, , ,371 General and administrative 111,115 66,716 1,535, ,160 Total costs and expenses 646, ,419 4,310, ,867 Loss from operations (360,964) (169,737) (3,485,576) (520,385) Interest income 6,070 1,486 21,096 4,654 Interest expense (876) (776) (3,456) (1,424) Other income (expense), net 2,553 (1,215) 4,528 (4,568) Loss before income taxes (353,217) (170,242) (3,463,408) (521,723) Income tax benefit (expense) 3, ,342 7,080 Net loss $ (349,977) $ (169,945) $ (3,445,066) $ (514,643) Net loss per share attributable to Class A, Class B, and Class C common stockholders: Basic $ (0.28) $ (0.20) $ (2.95) $ (0.64) Diluted $ (0.28) $ (0.20) $ (2.95) $ (0.64) 5

10 SNAP INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts, unaudited) Assets Current assets Cash and cash equivalents $ 334,063 $ 150,121 Marketable securities 1,708, ,247 Accounts receivable, net of allowance 279, ,659 Prepaid expenses and other current assets 44,282 29,958 Total current assets 2,366,794 1,179,985 Property and equipment, net 166, ,585 Intangible assets, net 166,473 75,982 Goodwill 639, ,137 Other assets 81,655 47,103 Total assets $ 3,421,566 $ 1,722,792 Liabilities and Stockholders Equity Current liabilities Accounts payable $ 71,194 $ 8,419 Accrued expenses and other current liabilities 275, ,325 Total current liabilities 346, ,744 Other liabilities 82,983 47,134 Total liabilities 429, ,878 Commitments and contingencies Stockholders equity Convertible voting preferred stock, Series A, A-1, and B, $ par value. No shares and 146,962 shares authorized, issued, and outstanding at 2017 and 2016, respectively. Liquidation preference of $95,175 at Convertible non-voting preferred stock, Series C, $ par value. No shares and 16,000 shares authorized, issued, and outstanding at 2017 and 2016, respectively. Liquidation preference of $54,543 at Convertible non-voting preferred stock, Series D, E, and F, $ par value. No shares and 83,851 shares authorized, issued, and outstanding at 2017 and 2016, respectively. 2 Series FP convertible voting preferred stock, $ par value. No shares and 260,888 shares authorized at 2017 and 2016, respectively. No shares and 215,888 shares issued and outstanding at 2017 and 2016, respectively. 2 Class A non-voting common stock, $ par value. 3,000,000 shares authorized, 883,022 shares issued and outstanding at 2017, and 1,500,000 shares authorized, 504,902 shares issued and outstanding at Class B voting common stock, $ par value. 700,000 shares authorized, 122,564 shares issued and outstanding at 2017, and 1,500,000 shares authorized, 31,469 shares issued and outstanding at Class C voting common stock, $ par value. 260,888 shares authorized, 216,616 shares issued and outstanding at 2017, and 260,888 shares authorized and no shares issued and outstanding at Additional paid-in capital 7,634,825 2,728,823 Accumulated other comprehensive income (loss) 14,157 (2,057) Accumulated deficit (4,656,667) (1,207,862) Total stockholders equity 2,992,327 1,518,914 Total liabilities and stockholders equity $ 3,421,566 $ 1,722,792 6

11 SNAP INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Cash flows from operating activities Net loss $ (3,445,066) $ (514,643) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 61,288 29,115 Stock-based compensation 2,639,895 31,842 Deferred income taxes (17,490) (7,952) Excess inventory reserve and related asset impairment 21,997 Other (6,356) 889 Change in operating assets and liabilities, net of effect of acquisitions: Accounts receivable, net of allowance (104,357) (118,434) Prepaid expenses and other current assets (39,783) (20,521) Other assets (4,771) (5,064) Accounts payable 49,696 6,486 Accrued expenses and other current liabilities 100,988 (19,728) Other liabilities 9,292 6,765 Net cash used in operating activities (734,667) (611,245) Cash flows from investing activities Purchases of property and equipment (84,518) (66,441) Purchases of intangible assets (8,107) (572) Non-marketable investments (10,030) (6,513) Cash paid for acquisitions, net of cash acquired (386,011) (104,001) Issuance of notes receivable from officers/stockholders (15,000) Repayment of notes receivables from officers/stockholders 15,000 Purchases of marketable securities (3,862,637) (1,565,347) Sales of marketable securities 511, ,898 Maturities of marketable securities 2,483, ,690 Change in restricted cash 10,271 (7,048) Net cash used in investing activities (1,346,739) (1,021,334) Cash flows from financing activities Proceeds from the exercise of stock options 11, Stock repurchases from employees for tax withholdings (394,156) Proceeds from issuance of Class A common stock in initial public offering, net of underwriting commissions 2,657,797 Repurchase of Class B voting common stock and Series FP voting preferred stock (10,593) Proceeds from issuances of preferred stock, net of issuance costs 1,157,147 Borrowings from revolving credit facility 5,000 Principal payments on revolving credit facility (5,000) Payments of initial public offering costs (9,672) (5,395) Net cash provided by financing activities 2,265,348 1,141,890 Change in cash and cash equivalents 183,942 (490,689) Cash and cash equivalents, beginning of period 150, ,810 Cash and cash equivalents, end of period $ 334,063 $ 150,121 Supplemental disclosures Cash paid for income taxes $ 6,226 $ 1,686 Supplemental disclosures of non-cash activities Issuance of Class B voting common stock related to acquisitions $ $ 96,145 Assumed equity awards in acquisitions $ 3,911 $ Purchase consideration liabilities related to acquisitions $ 16,486 $ 21,085 Repurchase of Class B voting common stock and Series FP voting preferred stock in exchange for notes receivable from officers/stockholders $ $ 13,500 Construction in progress related to financing lease obligations $ 1,451 $ 1,789 Net change in accounts payable and accrued expenses and other current liabilities related to property and equipment additions $ 13,139 $ 2,084 Deferred offering costs accrued, unpaid $ $ 1,739 7

12 SNAP INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (In thousands, unaudited) Adjusted EBITDA reconciliation: Net loss $ (349,977) $ (169,945) $ (3,445,066) $ (514,643) Add (deduct): Interest income (6,070) (1,486) (21,096) (4,654) Interest expense ,456 1,424 Other (income) expense, net (2,553) 1,215 (4,528) 4,568 Income tax (benefit) expense (3,240) (297) (18,342) (7,080) Depreciation and amortization (1) 18,786 10,633 61,288 29,115 Stock-based compensation expense (2) 181,044 6,767 2,639,895 31,842 Payroll tax expense related to stock-based compensation 2, , Spectacles inventory-related charges (3) 39,867 Adjusted EBITDA $ (158,922) $ (152,284) $ (720,056) $ (459,243) (1) Total depreciation and amortization expense by function: Depreciation and amortization expense: Cost of revenue $ 5,179 $ 1,258 $ 15,222 $ 2,206 Research and development 6,937 5,357 25,076 17,755 Sales and marketing 3,441 2,395 10,450 3,175 General and administrative 3,229 1,623 10,540 5,979 Total $ 18,786 $ 10,633 $ 61,288 $ 29,115 (2) Total stock-based compensation and related payroll tax expense by function: Stock-based compensation and related payroll tax expense: Cost of revenue $ 2,230 $ 122 $ 26,518 $ 532 Research and development 131,331 4,502 1,163,839 21,993 Sales and marketing 29,359 1, ,827 3,967 General and administrative 20, ,235,181 5,535 Total $ 183,256 $ 6,820 $ 2,664,365 $ 32,027 (3) Spectacles inventory-related charges were primarily related to excess inventory reserves and inventory purchase commitment cancellation charges in the third quarter of These charges are non-recurring and not reflective of underlying trends in our business. 8

13 SNAP INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (continued) (In thousands, except per share amounts, unaudited) Free Cash Flow reconciliation: Net cash used in operating activities $ (176,083) $ (167,728) $ (734,667) $ (611,245) Less: Purchases of property and equipment (21,212) (20,376) (84,518) (66,441) Free Cash Flow $ (197,295) $ (188,104) $ (819,185) $ (677,686) Non-GAAP Net Loss reconciliation: Net loss $ (349,977) $ (169,945) $ (3,445,066) $ (514,643) Amortization of intangible assets 10,607 4,849 31,454 16,228 Stock-based compensation expense 181,044 6,767 2,639,895 31,842 Payroll tax expense related to stock-based compensation 2, , Spectacles inventory-related charges 39,867 Income tax adjustments 60 (2,253) Non-GAAP net loss $ (156,054) $ (158,276) $ (711,633) $ (466,388) Weighted-average common shares - Diluted 1,247, ,299 1,166, ,871 Non-GAAP Diluted Net Loss Per Share reconciliation: Diluted net loss per share $ (0.28) $ (0.20) $ (2.95) $ (0.64) Non-GAAP adjustment to net loss Non-GAAP diluted net loss per share $ (0.13) $ (0.19) $ (0.61) $ (0.58) 9